Sonatrach opens the tap to feed a gas-hungry Europe

After Russia’s invasion of Ukraine, Algerian Aramco is reinforced as an alternative to European countries most exposed to Russian hydrocarbons. Italy has already requested more gas and Spain is seen as a possible way of passing more Algerian gas to central Europe.

Europe’s energy self-sufficiency, or at least the independence of Russian hydrocarbons, is seen by some as an almost imperative need in recent weeks. However, the European context ten years ago was different, as can be deduced from the research by Francis Ghilès published by the think tank CIDOB in February 2013. “The decrease in European gas needs and the wide margin of maneuver of the two gas pipelines that take Algerian gas to Spain, one directly and the other to the Iberian Peninsula through Morocco, suggest that no new gas pipeline is currently needed than an Algeria with Europe”.

For the Spanish, less exposed to Russian gas, it may still be unnecessary -although the pipeline that crosses Morocco is closed-; and, furthermore, in 2020, the US unseated Algeria as first supplier of natural gas to Spain for the first time in 30 years, according to the magazine Atalayarciting data from the Strategic Reserves of Petroleum Products Corporation (Cores).

In Italy, on the other hand, the Russian raw material weighs more in the energy mix. In 2021, Russia was the first supplier of gas to the country with 28,200 million cubic meters; Algeria was the second (21,200 million) and Qatar, the third (7,280 million), reports The Republic.

Hence, at the beginning of March, in the midst of a rise in gas prices, Luigi di Maio, Foreign Minister, traveled to Algiers to meet his North African counterpart and ask him to send more gas to Italy through the TransMed-Enrico Mattei gas pipeline, which crosses the Sicilian Channel, runs through Italy and extends to Slovenia. The answer? “We are ready to inject up to 30 billion cubic meters a few days ago, Abdelkrim Touahria, the Algerian ambassador in Rome, told The Republic.

Sonatrach has announced that it will invest 40,000 million dollars between 2022 and 2026 in the exploration and extraction of gas and oil

And who is in charge of Algerian gas? Well, the National Society for the investigation, production, transport, transformation and commercialization of hydrocarbons. To abreviate: Sonatrach. The Algerian state oil and gas company was created on December 31, 1963 during the presidency of Ahmed Ben Bella, in a very particular context: Algeria had achieved the independence from France in 1962 after a very painful war and the country rubbed shoulders with the so-called non-aligned countries. At that time, the fledgling company was inspired by other similar models, such as Petróleos Mexicanos (Pemex) and the Iranian Nioc.

At the head was Belaïd Abdesselam, the first CEO of Sonatrach, who at 35 years of age enjoyed the absolute trust of Ben Bella. He later even became Minister of Industry and Energy. The Algerians wanted to be owners of their hydrocarbon reservesbut for this they had to reach an understanding with France, the until recently colonial power, which agreed to renegotiate the oil chapter of the Evian agreements.

Independence brought with it a long period of political instability and Colonel Houari Boumediene staged a coup d’état with which he dismissed Ben Bella on June 19, 1965. “He inherited the Algerian-French new agreement which regulates issues ‘relating to hydrocarbons and the industrial development of Algeria’, negotiated during the Ben Bella period and signed on July 29, 1965, forty days after the coup”, says the engineer and former vice president of Sonatrach Hocine Malti in his book Secret history of Algerian oil (secret history of Algerian oil).

“It included an important novelty, that of the operator function that Sonatrach would be entrusted with certain plots of the association that Algeria and France were going to form with a view to exploring Algerian hydrocarbons”, the author points out.

In practice, there were two operators: Sonatrach and Sopefal (the French oil company in Algeria), a subsidiary of the French group Erap that became Elf-Erap in 1967. According to Malti, the French burned the gas that it was mixed with oil because for them “there was no real market for gas in the world” and it had “zero value”.

For the Algerians this was a “intolerable wasteeven a plundering of a non-renewable resource”. So they ended up agreeing that the operators had to sell to the Algerian State “the quantities of gas that they wished to acquire for its commercialization within the country or abroad”.

Will Sonatrach be able to take advantage of gas demand from Europe after Russia’s fall from grace? “The country has big problems in relation to the increase in supply in the context of the growing domestic demand“, Oxford researcher Jonathan Stern told S&P Global.

“The unstable country continues to be plagued by deadly citizen protests, worker strikes and corruption scandals that affect the state energy company Sonatrach, which could endanger its oil and gas production”, they added from the US consultancy. The Algerians, on the other hand, see themselves capable; and according to Toufik Hakkar, current director general of Sonatrach, the company will invest $40 billion between 2022 and 2026 to continue sending your precious resources to the world.